The stock fell more than 7% Friday afternoon, after Apple's better-than-expected earnings report wasn't enough to satisfy investors.
But it isn't sales volumes that matter to Apple anymore, many experts are starting say. Apple provides premium products, enabling it to lift prices, which lifts gross margins, and are justified by the services a user can enjoy on the device. And those services of course are likely to have significant upside, perpetuating the spin wheel.
Greg Portell, Lead Partner of Global Consumer Industries and Retail at A.t. Kearney Consulting is "not really concerned about unit sales," he told TheStreet. The idea -- especially in a slowing market for iPhones -- is to "maximize profit from a slower growth base," Portell said. The next step is to "raise prices and maximize the associated revenue with those devices." That associated revenue is the services revenue, which accounted for 15.7% of Apple's total quarterly revenue, and grew 17% year-over-year.
While some investors may think Apple is implying a lack of confidence in its ability sell devices in volume, Portell said the units numbers is simply not the important number to focus in on. "I don't think it's about confidence -- it's a misleading number in their mind," he said. The decision to stop reporting unit sales numbers focuses investor's attention on services growth.
Others agree. "I could care less about Apple not breaking out unit numbers," Zev Fima, portfolio analyst for Jim Cramer's Action Alerts Plus investment members club told TheStreet. He added, "it will force analysts to focus on the real story, which is services." Apple invesors also seem surprised to see demand come down a bit, but that should be expected if they are to enjoy higher average selling prices. "With higher ASPs and longer upgrade cycles, it makes perfect sense that unit sales growth would slow or remain flat," Fima said.
Apple shares are now up 22% on the year, after having been up more than 30% before the earnings print.
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